Fund raising via offshore instruments lost sheen in 2008
New Delhi, Jan 01, 2009 (Asia Pulse Data Source via COMTEX) –
Corporate India's offshore fund mopping activity last year declined by 46 per cent to $19.41 billion as foreign
investors were revising their investment strategies on the back of global credit crunch.
In 2007, Indian corporates had mobilised total funds from abroad worth $35.96 billion through Asset Depository
Receipts (ADRs), Global Depository Receipts (GDRs), External Commercial Borrowings (ECBs) and Foreign
Currency Convertible Bonds (FCCBs), as per the data compiled by the brokerage arm of SMC, Global
NexGen Capital.
\"Foreign investors are revisiting their investment strategy as to whether they would invest in Indian companies,
which are facing pressure because of global slowdown,\" NexGen capital Equity head Jagannadham
Thunuguntla said.
Reduced fund raising is already reflecting signs of slowdown in capacity expansion and industrial production by
Indian corporates, as the fuel for growth engine has dried up, according to NexGen.
According to the report, funds raised through ADRs and GDRs by Indian companies, have fallen by 96.21 per
cent to $0.10 billion in 2008 from $2.64 billion in 2007. Besides, the number of number of ADRs and GDRs
being listed on the overseas bourses also fell to four in 2008 from 15 in 2007.
\"Foreign funds are facing redemption pressure at home, hence they are weighing the sustainability of the
Indian corporates,\" Thunuguntla added.
The decline in investment signifies that once high- profile ADRs and GDRs went out-of-favour in 2008, it added.
Besides, the total funds mopped up through ECBs by Indian companies decreased by 31 per cent to USD
17.83 billion in 2008 from USD 25.79 billion in 2007. The year also saw a drop in the number of ECBs to 410 in
2008 from 680 in 2007, indicating that the corporates are facing tougher times even in raising debts. Besides,
fund mop-up via FCCBs has also plunged 80 per cent to USD 1.48 billion on the back of declining share prices.
In 2007 the companies had raised USD 7.52 billion through FCCBs. Also, foreign corporate bonds issuance
has dropped to 20 in 2008 from 75 in 2007.
Besides, the number of corporates facing troubles in raising funds in the domestic market with the IPO volumes
declining have also fallen by 50.54 per cent to USD 4.05 billion in 2008 from USD 8.18 billion in 2007.
The Private Equity volumes in India went down to USD 10.26 billion during January-November 2008, against
USD 19.03 billion during 2007.
\"In a nutshell, the ability of Indian corporate in fund raising through high profile instruments such as ADRs,
GDRs, ECBs, FCCBs, IPOs, Private Equity has fallen from USD 63.17 billion in 2007 to USD 33.73 billion in
2008, indicating a fall of 46.61 per cent,\" the report added.